Diageo to cut €450m in costs due to Trump… but Guinness is safe
Guinness owner Diageo unveiled plans yesterday to cut almost € 450 million in costs in the face of US tariffs.
However, the drinks giant, which owns brands including Johnnie Walker Scotch whisky, Moet et Chandon Champagne and Gordon's Gin, repeated its statement from January that it has no plans to sell off Guinness.
Diageo, which is worth € 50 billion globally, said: 'We are introducing the first phase of our Accelerate programme, which sets out clear cash delivery targets and a disciplined approach to operational excellence and cost efficiency. Pic: Getty Images
'This programme will represent a shift in how we do business, moving to a more agile global operating model, and is underpinned by our strong digital and data capabilities.
'This simplified approach will create a stronger platform to optimise investment and allocate resources effectively towards long-term sustainable growth.'
Cost-cutting would come from changes to the company's trade investments and advertising spend, overheads and supply chain, said the firm's finance chief, Nik Jhangiani. Nik Jhangiani. Pic: File
Diageo is also expected to dispose of some significant assets to help reduce its leverage ratio from 3.1 times net debt to operating profit at the end of last year to between 2.5 and three times. Any sales could include some major assets, Mr Jhangiani hinted.
'We see… some opportunities for what I would call substantial changes versus portfolio trimming. It's clearly going to be above and beyond the usual smaller brand disposals you've seen over the last three years,' he said.
However, that will not include Guinness, where chief executive Debra Crew said 'nothing has changed' with regards to the iconic stout, which was described as 'well-performing'. Pic: Diageo/PA Wire
In fact, it is selling so well that some pubs in Britain brought in rationing and shipped in more supplies from Dublin over Christmas to cope with demand.
The cost cuts will help Diageo, which is also the world's largest spirits distiller, deliver about € 2.7 billion in free cash flow a year from the next financial year.
The company also plans to reduce its debt-to-earnings ratio to between 2.5 and 3 by the fiscal year 2028. Pic: Ross Mahon/Shutterstock
'This will be delivered through a combination of organic growth and positive operating leverage, combined with tighter capital discipline, and appropriate and selective disposals over the coming years,' it explained.
U.S. President Donald Trump's 10% tariff on imports from the EU and Britain will mean a € 130 million hit to Diageo's annual operating profit, the firm estimates.
The company employs 10,000 people worldwide, including 1,200 in Ireland. It has ten sites around the country, including its HQ at St James's Gate in Dublin, its Baileys plant near Belfast and the Smithwick's brewery in Kilkenny.
Asked if the cost savings could mean job cuts or the price of a pint increasing, the company did not respond specifically.
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